MORTGAGES EXPLAINED

WHAT IS A MORTGAGE?

A mortgage is a loan secured against a property.

WHAT TYPES OF MORTGAGE CAN I GET?

There are many different types of mortgage, here are the types of mortgage which you should know about: 

  • Fixed rate - your interest rate is fixed for a set period of time

  • Tracker - your interest rate will follow an external index and your interest rate may increase or decrease

  • Discount rate - a percentage discount against the lenders standard variable rate

  • Standard Variable Rate - a rate of interest set as standard for those outside of deal periods

  • Offset - this is a bank account linked to your mortgage which would hold savings for which you would pay no interest on the equivalent mortgage balance

LOAN TO VALUE

This represents the amount of the loan expressed as a percentage of the property's value.

CONVEYANCERS (SOLICITORS)

Whether you are a first time buyer or paying down the last years of your mortgage, each time you remortgage, you will need a solicitor. 

Solicitors who specialise in property transactions are known as conveyancers.

 

REPAYMENT OPTIONS

There are three ways to make your mortgage payments, these are: 

  • Capital & Interest (Repayment) - each month interest and the money owed is paid off, your mortgage will be fully repaid at the end of your mortgage term so long as you always make your payments.

  • Interest Only - each month you pay the interest (or it can be added to the amount owed). This means you will still owe the full loan amount at the end of the mortgage (or the full loan amount plus interest). 

  • Part and Part - this combines both capital & interest and the interest only models. For example, if it is split 50/50 at the end of the mortgage you would still owe 50% of the mortgage amount borrowed and 50% of the mortgage would have been repaid

SURVEYS

When you buy or remorgage a property you will likely need a survey completed. Here are the three main types of surveys available to you: 

  • Basic Survey - a basic overview of the property's overall condition.

  • Homebuyer's Survey - looks closely for visible issues such as damp and subsidence. They will not move furniture etc. to check,

  • Building Survey - closely assesses the condition and structure of the property; advises you on any defects and property maintenance.

PROPERTY TENURE

  • Freehold - you own the building and ground underneath it.(Feuhold in Scotland). This is usually how houses are owned.

  • Leasehold - you own the lease on a property which last for a set number of yours. This is usually how flats are owned.

  • Commonhold - the commonholders own the freehold and each flat has a lease. The commonholders take responsibility for communal areas and services.

 

WHAT IS THE PROCESS OF GETTING A MORTGAGE OR COMMERCIAL LOAN?

1) find a mortgage advisor who can advise on you the market (not just the provider they work for)
2) go through the fact find with them and provide them with all the of documents requested as it will be needed for accuracy
3) your adviser will now check the market, do their research and get you an agreement in principle/indicative offer
4) your adviser will recommend a mortgage/loan deal and if you accept that recommendation, apply for the mortgage/loan on your behalf. 
5) the lender will complete a survey on the property to ensure its suitability
6) if the property is suitable then you will receive a mortgage/loan offer once all the paperwork is done
7) now you have a mortgage offer you can instruct your solicitor to begin and set a target exchange/completion date.
8) complete the forms your solicitor asks you to fill out and return, you can ask either your solicitor or mortgage adviser for help with this
9) exchange contracts and pay deposit (if buying a home)
10) mortgage completes and funds are released by the lender

 

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